IndiGo, SpiceJet shares drop amid ATF price hike; why aviation sector outlook looks cautious

The ATF prices were increased by 5.46%, in line with a rise in their international benchmarks. The price of jet fuel or ATF has been raised by ₹6.28 per litre, or 5.46%, to ₹121.28 per litre for domestic airlines, according to state-owned oil firms.

The increase comes on the back of a ₹5 a litre rise in rates on August 1. The two increases will add to the financial burden of airlines, for whom ATF makes up to 40% of operating costs.

ATF prices are generally revised on the first of every month based on benchmark international prices and foreign exchange rates.

While ATF prices for domestic and international routes were unchanged during April-June 2026 owing to the absence of revisions by oil marketing companies (OMCs), fuel costs remain elevated relative to the previous year.

ATF prices for domestic routes in August 2026 have increased by around 20% on a year-on-year (YoY) basis, following the ₹5,000 per kilolitre hike announced by OMCs, which is likely to exert additional cost pressure on airlines.

On Tuesday, the global crude oil prices surged to a seven-day high above $91 per barrel (bbl) amid recent escalations between the United States and Iran in West Asia. This also made investors turn cautious for the sector.

Data showed that the benchmark global crude oil, Brent prices surged to a seven-day high of $91.56 per barrel (bbl) on Tuesday’s market, its highest level since August 25, 2026, due to the escalations in West Asia prompting supply concerns and eroding hopes of a peace deal.

ICRA maintains negative outlook

Ratings agency ICRA has maintained a negative outlook on the Indian aviation industry, reflecting the expected weakening of the RASK-CASK spread. The outlook factors in hardening ATF prices and disruptions in the availability of certain international airspaces since February 28, 2026, following the escalation of the conflict in West Asia, along with continued depreciation of the INR against the USD.

Further, ICRA forecasted domestic air passenger traffic growth at 3-6% in FY27.  The international air passenger traffic for Indian carriers is also projected to witness a 3-6% decline in the current fiscal year.

“Although domestic ATF price hikes have been moderated through Government intervention, fuel remains a dominant cost, accounting for 30-40% of airline operating expenses. Further, with 35-50% of airline costs being dollar-denominated—including fuel, aircraft lease rentals and maintenance expenses—sustained high crude prices and a weak rupee continue to pose risks,” said ICRA analysts.

On July 13, SpiceJet had assured the court that it will deposit ₹50 crore in 45 days with the court registry and the remaining ₹94.50 crore will also be deposited in the next 90 days.

Here’s how the stocks are faring

Opening at ₹5,065 apiece, shares of IndiGo declined nearly 4% to an intraday low of ₹5,042.50 apiece on Tuesday. At 11:12 AM, the airline stock was down 2.81% ₹5,087 per share on the National Stock Exchange.

SpiceJet shares, after opening at ₹10.35 apiece on BSE, have lost 2% to today's low of ₹10.12. At the time of writing the article, the stock was seen at ₹10.21 per share, falling 1.07%.

Since the beginning of the year, IndiGo's shares have slipped nearly 1%, and its market capitalisation stands at ₹1.97 lakh crore.

Meanwhile, SpiceJet, with a market capitalisation of ₹1,558.15 crore, has tanked 65% so far since the beginning of 2026.